Washington Suburban Sanitary Commission v. Reichl et al
Filing
16
OPINION. Signed by Chief Judge Jose L. Linares on 8/14/2018. (ld, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
IN RE LIQUID ALUMINUM
ANTITRUST LITIGATION
SULFATE
Civil Action No.: 16-rnd-2687 (JLL)
OPINION
This Docttment Relates to: Civ. Action Nos. 1 711416, 17-4656, ctnd 17-4659
LINARES, Chief District Judge.
This matter comes before the Court by way of Defendants Delta Chemical Corporation
(“Delta Chemical”), John D. Besson, and Rebecca L. Besson’s Motion to Dismiss Plaintiffs
Washington Suburban Sanitary Commission (“WSSC”), Mayor and City Council of Baltimore
(“Baltimore City”), and City of Richmond (“Richrnond”)’s Amended Complaints (ECF Nos. 555,
652, and 653) pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure and Strike Certain
Allegations pursuant to Rule 12(f) of the Federal Rules of Civil Procedure. (ECF No. 901).
Plaintiffs have submitted Opposition (ECF No. 902). to which the Defendants have replied. (ECF
No. 904). The Court decides this matter without oral argument pursuant to Rule 78 of the Federal
Rules of Civil Procedure. For the reasons set forth below, the Court denies Defendants’ Motion
to Dismiss and Strike Certain Allegations.
An additional copy of Plaintiffs’ Opposition was filed at a later time. (ECF No. 1002). Said Opposition is identical
to the originally tiled brief Accordingly, the Court will rely on the arguments set forth by Plaintiff in their original
Opposition. (ECF No. 902).
I.
The Court has
set
BACKGROUND2
forth, at length, the factual and procedural background as it
this Multidistrict Litigation in its Opinion dated July 20, 2017.
pertains to
(ECf No. 405 at 1-24).
Accordingly, the Court need not restate, and hereby incorporates, same herein. Thus, the Court
will only set forth the relevant factual and procedural background as it pertains to these specific
Defendants and their motions.
Plaintiffs brought this action seeking to recover monetary damages and injunctive relief
against Delta Defendants for conspiring to suppress and eliminate competition in the sale and
marketing of aluminum sulfate (“Alum”), pursuant to the Sherman Antitrust Act, 15 U.S.C.
etseq., the Clayton Antitrust Act, 15 U.S.C.
State of Matyland. (Compi.
]
fix.
1,
§ 12—17 & 29 U.S.C. § 52—53, and the laws of the
1). Plaintiffs contend that Delta Defendants agreed
allocate customers for, and to
§
to “rig bids and
stabilize, inflate, and maintain the price of Alum sold
to
companies. mumcipal authorities, and governmental subdivisions in the United States from
January 1. 1997 through at least February 2011
“
(Id.
¶ 1). Specifically, Plaintiffs allege that
Delta Defendants met to “discuss their respective Alum businesses,” agreed to “stay away’ from
each other’s historical customers,” submitted “intentionally high,” or “throw away” bids, and
withdrew winning bids “in cases where a bid was inadvertently submitted.” (Id.
¶ 4).
Defendant John D. Besson is presently a resident of Miami Beach, Florida.
(id.
¶ 20). He
was the president of Delta Chemical and “oversaw its sale and marketing of water treatment
chemicals, including Alum,” in addition to “effectuating attempts” to sell or merge Delta Chemical
For purposes of brevity, the Court will only cite to the WSSC Amended Complaint whenever the WSSC. Baltimore
City. andor Richmond Amended Complaints allege similar facts. Hence. this background is generally derived from
Plaintiff WSSC’s Amended Complaint (“Cornpl.””). which was originally docketed in Civ. Action No. 17-11416.
(ECF No. 1). The Court must accept the allegations therein as true at this stage of the proceedings. See Aiston i.
Countiywide fin. Crnp., 585 F.3d 753, 758 (3d Cir, 2009).
2
with another
company.
(Id.
¶
20).
Plaintiffs allege that Defendant John Besson joined,
participated in, and benefitted from the unlawful [Alum] conspiracy.” (Ic!.
¶
20). Defendant
Rebecca L. Besson is presently a resident of Miami Beach, Florida and was the chairperson of
Delta Chemical’s board of directors. (Id.
¶ 21).
Plaintiffs aver that Defendant Rebecca Besson
“knew or should have known about the unlawful [Alum] conspiracy
and profited substantially from it.” (Id.
¶ 21).
...,
but allowed it continue
After Delta Chemical combined with USALCO in
November 2011, Defendants John and Rebecca Besson became USALCO consultants. (Id.
¶ 21).
Defendant Delta Chemical is a Maryland corporation which sold Alum throughout the
United States with a principal place of business in Baltimore. (Id.
¶
51). Plaintiffs allege that
“[firom the beginning of the Conspiracy Period to the date USALCO combined with Delta
Chemical on November 17, 2011, Delta Chemical was an active participant in. and benefitted
from, the conspiracy.” (Id.
¶
51). Moreover, “[a]s a result of [Defendant] Delta Chemical’s
combination with USALCO, [Defendant] Delta Chemical ceased to be a potential competitor in
the sale and marketing of Alum.” (Id.
¶ 51).
Plaintiffs contend that the combination “was made
in furtherance of and intended to reinforce, the Defendant’s unlawful conspiracy.
.
.
USALCO’s market power and eliminating the possibility of competition emerging
by increasing
.
.
.
.“
(Id.
¶
52). Plaintiffs also argue that Defendants John and Rebecca Besson “profited handsomely” from
the combination. (Id.
¶ 53).
Prior to the combination, Defendant Delta Chemical sold Alum to Plaintiffs WSSC and
Baltimore directly as well as indirectly through C&E Services. Inc. (“C&E Services”), located in
Washington. D.C. (Ed.
¶ 54).
Plaintiffs assert that, Defendant Delta Chemical. C&E Services, or
USALCO would always be the “winning” bidder despite solicitation of bids from outside Alum
providers. (Id.
¶
54’). Additionally. Plaintiffs allege that Defendant Delta Chemical’s contracts
3
for polyaluminum chloride (“PAC”) “raise similar concerns [of conspiratorial conduct].” (Id.
131).
¶1
Specifically, Delta Chemical submitted the winning bid in a 2004 PAC contract with
Plaintiff WSSC at a rate of $1,376.00 per ton. (Id.
¶
131). In 2009, Defendant Delta Chemical
again submitted a winning bid for a PAC with Plaintiff WSSC at a price of $2,380.00 per ton, a
more than 72% increase. (Id.
¶
131) (emphasis in original). The next lowest bid was submitted
for $7,250.00 per ton (three times Defendant Delta Chemical’s winning bid) by Intercoastal
Trading, Inc. (Id.
¶
13 1).
Plaintiffs WSSC and Baltimore City purchased Alum from Defendant Delta Chemical via
“requirement contracts” at an as-needed basis from 1997 through early-2005. (Id.
¶
246). “for
example, WSSC solicited bids for new Alum contracts to begin in 2003 and 2004.” (Id.
¶ 246).
In both instances, Plaintiff WSSC received bids from Defendant Delta Chemical and General
Chemical Corporation. (Id.
¶
246). In 2004, Plaintiff WSSC “solicited bids for a new Alum
contract” and C&E Services was the only bidder. (Id.
¶{
247). Plaintiff WSSC alleges that, “as
part of and in furtherance of the conspiracy,” C&E Services consistently raised the price it charged
Plaintiff WSSC for Alum via the 2005 contract and, “[a]s a result, the price per ton of Alum
increased by approximately 60%” from “$185.85 per ton to S314.00 per ton.” (Id.
¶
248). On
December 23, 2008, C&E Services submitted a notification from Defendant Delta Chemical
justifying an increase in Alum prices because of the “sulftiric acid market,” a necessary component
for making Alum. (Id.
¶ 249).
However. Plaintiff WSSC contends that this justification stood in
contrast to a decline in the price of sulfuric acid “by more than a third” from its October 2008
index price by December 2008. (Id.
¶J
249) (emphasis in original). In 2009, Plaintiff WSSC
solicited bids for a new Alum contract througti “BidBridge, an online solicitation and bidding
Plaintiffs’ contention that Delta Defendants’ use of PAC contracts in furtherance of the conspiracy alleged herein is
found solely in the WSSC Amended Complaint. (ECF No. 555 at 131).
4
platform,” btit
only
received three bids. (Id.
I
251). Defendant Delta Chemical submitted the
winning bid at $304.00 per ton and C & S Chemicals, Inc. allegedly submitted a “throw away” bid
of $537.00 per ton. (Id.
¶ 251).
After U$ALCO combined with Defendant Delta Chemical, USALCO raised the price it
charged Plaintiff W$SC for Alum through the 2009 contract from $304.00 per ton to $311.50 per
ton. (Id.
¶ 252).
Plaintiff WSSC argues that the prices which USALCO charged for Alum were
substantially similar to those charged by Defendant Delta Chemical prior to the combination and
further demonstrate that “both [Defendant] Delta Chemical and USALCO were members of the
conspiracy.” (Id.
¶ 253).
In April 2014, Plaintiff WSSC received a bid for a new Alum contract
from USALCO for $314.19 per ton and a bid from Chemtrade, General Chemical’s “successor-in
intet-est,” for $422.00 per ton. (Id.
¶ 254).
Plaintiff WSSC contends that “Chemtrade’s bid, which
was $107.81 (34.3%) more than USALCO’s bid, was a ‘throw away’ bid made in furtherance of
the conspiracy.” (Id. J 254).
Plaintiff Baltimore City makes similar allegations against Delta Defendants regarding
Alum contract bidding. In 2006, Plaintiff Baltimore City received two bids and Defendant Delta
Chemical submitted the winning bid. (ECF No. 652 at ¶ 153). In 200$, Defendant Delta Chemical
submitted “the oniy bid” for a new Alum contract with Plaintiff Baltimore City and provided a
price of S2$0.97 per ton. (Id. ¶ 155—156) (emphasis in original). In 2009, Defendant Delta
Chemical attempted to raise the price of Alum for Plaintiff Baltimore City by 29.7% due to an
“increase in price of the raw materials used to make Alum.” (Id.
¶
157—158). After negotiation,
Defendant Delta Chemical agreed to increase the price by 23.1% and charge $345.97 per ton of
Alum for 2009. (Id.
¶
159—160). In 2012, Plaintiff Baltimore City received bids from USALCO
5
and General Chemical Corporation for a contract and U$ALCO was the
winning
bidder.
(Id.
¶1
164).
Plaintiffs contend that,
“[i]n
addition to the lack of competition and resultant inflated prices
demonstrated above,” Delta Defendants’ “bidding history over the Conspiracy Period” with
respect to Alum contracts was not “freight-logical.” (Compl.
255). Specifically, Plaintiffs allege
that GEO Specialty Chemicals, Inc. had a water treatment chemical plant located in Baltimore,
Maryland but never submitted a bid to supply Alum to Plaintiff WSSC. (Id.
USALCO was headquartered
in
¶ 255).
Similarly,
Maryland but never submitted a bid to Plaintiff WSSC prior to
combining with Defendant Delta Chemical. (Id.
¶ 256).
Additionally, Southern lonics had a water
treatment chemical plant in Williarnsport. Maryland and also never submitted a bid to Plaintiff
Baltimore City. (ECF No. 652 at
¶
168).
“As a result of the conspiracy among [Delta] Defendants,” Plaintiffs were allegedly “forced
to pay supra-competitive prices for Alum” which they purchased from Defendant Delta Chemical
and USALCO. (Cornpl.
¶
257. 260). Plaintiff WSSC saw its cost for Alum “quadruple over a
decade, rising from $82.10 per ton in 2000 to $314.00 per ton by 2010.
.
.
.“
(Id.
argue that Delta Defendants “used non-public means of communication
.
¶ 260).
.
.
Plaintiffs
to eliminate
competition by, inter a/ia, fixing prices, rigging bids, and allocating customers for Alum in the
United States.” (Id.
¶
262). Plaintiffs further allege that Defendant John Besson made false
representations regarding price increases in Alum due to increases in prices of raw materials. (Id.
¶
271—276).
Moreover, Delta Defendants allegedly “took additional affirmative acts of
concealment, including ensuring that there were few written communications regarding their
conspiracy and agreement.” (Id.
¶ 279).
6
Accordingly, Plaintiffs assert the following claims: Count I
—
Conspiracy in Restraint of
Trade in violation of the Sherman Act against all Defendants except Defendant Rebecca Besson;
Count II
—
Conspiracy in Restraint of Trade in violation of the Maryland Antitrust Act against all
Defendants except Defendant Rebecca Besson; Count III
Defendants except Defendant Rebecca Besson; Count IV
Delta Chemical; Count V
—
—
—
—
Common Law Fraud against all
Breach of Contract against Defendant
Breach of Contract against Defendant Delta Chemical; and, Count VI
Restittttion, Disgorgement, and Unjust Enrichment against Delta Defendants
.
Defendants seek
to dismiss Plaintiffs’ Amended Complaints for failure to state a claim upon which relief can be
granted under Federal Rules of Civil Procedure 1 2(b)(6) ad/or to strike certain allegations from
Plaintiffs’ Amended Complaints under Federal Rules of Civil Procedure 12(f). (ECF No. 901).
LEGAL STANDARD
II.
A. Rule 12(b)(6) Failure to State a Claim
To withstand a motion to dismiss for failure to state a claim, a “complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.” Ashcroft v. Iqba!, 556 U.S. 662, 67$ (2009) (quoting Bell Ad. Coip. v. Twomblv, 550 U.S.
544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
Plaintiff Baltimore City asserts the following claims in its complaint against Delta Defendants: Claim I Conspiracy
in Restraint of Trade in violation of the Sherman Act against all Defendants: Claim II Conspiracy in Restraint of
Common Law fraud against
Trade in violation of the Maryland Antitrust Act against all Defendants: Claim III
Defendant Delta Chemical; Claim IV Breach of Contract against Defendant Delta Chemical; Claim V Breach of
Contract against Defendant Delta Chemical; and, Claim VI Restitution, Disgorgement, and Unjust Enrichment
against Defendant Delta Chemical. (ECF No. 652). Additionally, Plaintiff Richmond asserts the following claims in
its complaint against Delta Defendants: Count I Conspiracy in Restraint of Trade in violation of the Sherman Act
against all Defendants except Defendant Rebecca Besson; Count II— Conspiracy in Restraint of Trade in violation of
the Virginia Antitrust Act, Va. Code Ann. 59.1-9.5 against all Defendants except Defendant Rebecca Besson: and,
Count V Restitution, Disgorgement, and Unjust Enrichment against all Defendants. (ECF No. 653). As will be
further explained herein, the analysis for all these claims is nearly identical. Thus, the Court will analyze all claims
jointly unless there is a substantive reason for a separate analysis.
1
—
—
—
—
—
—
—
—
7
alleged.” Id., 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). “The plausibility standard is
not
akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant
has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556).
To determine the sufficiency of a complaint under Twomblv and Iqbal in the Third Circuit,
the Court must take three steps. “First. it must ‘tak[e] note of the elements a plaintiff must plead
to state a claim.’ Second, it should identify allegations that, ‘because they are no more than
conclusions, are not entitled to the assumption of truth.’ Finally, ‘{w]hen there are well-pleaded
factual allegations, a court should assume their veracity and then determine whether they plausibly
give rise to an entitlement for relief.” See Connellv v. Lane Constr. Corp., $09 F.3d 780, 787 (3d
Cir. 2016) (quoting Iqbal, 556 U.S. at 675, 679) (citations omitted).
“In
deciding a Rule
l2(b)(6) motion, a court must consider only the complaint, exhibits attached to the complaint,
matters of public record, as well as undisputedly authentic documents if the complainant’s claims
are based upon these documents.” Mct’er v. Beflchick, 605 F.3d 223, 230 (3d Cir. 2010). The
Third Circuit has held that the Court can review the record of prior actions between the parties and
take judicial notice of the same in considering a motion to dismiss. See Toscano v. Comi. Gen.
Life Ins. Co., 288 F. App’x 36, 38 (3d Cir. 2008).
B. 12(1) Motion to Strike Certain Allegations
Under Rule 1 2(f) of the Federal Rules of Civil Procedure, “[t]he Court may strike from a
pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous
matter.” Fed. R. Civ. P. 12(f). The Court may act either “on its own” or on a motion by a party. Id.
at 12(f)(l)-(2). “The purpose of a motion to strike is to simplify the pleadings and save time and
expense by excising from a plaintiffs complaint any redundant, immaterial, impertinent, or
scandalous matter which will not have any possible bearing on the outcome of the
8
litigation.” Corradetti v. Sanitary Landfill, Inc., 912 F. Supp. 2d 156 (D.N.J 2012) (quoting
Garlanger v. Verbeke, 223 F. Supp. 2d 596, 609 (D.N.J. 2002)). “[MJotions to strike are usually
‘viewed with disfavor’ and will generally ‘be denied unless the allegations have no possible
relation to the controversy and may cause prejudice to one of the parties, or if the allegations
confuse the issues.” Gray v. Bayer Corp., 2010 WL 1375329, at *2 (D.N.J. Mar. 31,2010) (citing
Garlanger, 223 F. Supp. 2d at 609). In fact, “Rule 12(f) should be construed strictly against
striking portions of the pleading on grounds of immateriality and if the motion is granted at all, the
complaint should be pruned with care.” Morgan Home fashions, Inc. v. UTL US. Inc., 2004 WL
1950370, at *8 (D.N.J. Feb. 9, 2004).
III.
ANALYSIS
A. i’Iotion to Dismiss
For the following reasons, Delta Defendants’ Motion to Dismiss Plaintiffs’ Consolidated
Complaint is denied.
a. Conspiracy in Restraint of Trade in Violation of the Sherman Act
To survive a motion to dismiss, Plaintiffs must prove two essential elements for a claim of
conspiracy in restraint of trade in violation of the Sherman Act. Plaintiffs must show that (1) a
“contract, combination, or conspiracy” existed and that (2) such contract, combination, or
conspiracy “imposed an unreasonable restraint of trade.” Dickson v. Microsoft Corp., 309 F.3d
193, 202 (4th Cir. 2002).
Preliminarily, this Court has already found that, at least at the pleading stage, a conspiracy
existed. (ECF No. 405 at 45-65). Additionally, in their Amended Complaints, Plaintiffs allege
that Delta Defendants conspired to suppress and eliminate competition in the sale and marketing
of Alum. (Compl.
¶
1). Specifically, Plaintiffs allege that Delta Defendants agreed to “rig bids
9
and allocate customers for, and to fix, stabilize, inflate, and maintain the price of Alum sold to
companies, municipal authorities, and governmental subdivisions in the United States from
(Id.
January 1, 1 997 through at least February 2011
¶ 1). Fttrtheimore, Plaintiffs allege
Delta Defendants met to “discuss their respective Alum businesses,” agreed to “‘stay away’ from
each other’s historical customers,” submitted “intentionally high,” or “throw away” bids, and
withdrew winning bids “in cases where a bid was inadvertently submitted.” (Id.
¶
4). These
allegations are sufficient to support aprirnafacie claim Delta Defendants engaged in a conspiracy
which imposed an unreasonable restraint on the trade of Alum in violation of the Sherman Act.
Hence, the claim must survive Delta Defendants’ Motion to Dismiss.
b. Conspiracy in Restraint of Trade in Violation of the Maryland Antitrust Act
and the Virginia Antitrust Act
“Section l1—204(a)(1) of the Maryland Antitrust Act is the state law analogcte of Section
I of the Sherman Act.” Merck-Medco Managed Care, Inc. v. Rite Aid Coip. 22 F. Supp. 2d 447,
450 n.4 (D. Md. 199$). The purpose of the Maryland Antitrust Act is “to complement the body of
the federal law goveniing restraints of trade.” Nat. Design, Inc. v. Rouse Co., 485 A.2d 663 (1983)
(quotingMd. Code Ann.
§ 11-202(a) (2005)). In construing the Act, “the courts [are to] be guided
by the interpretation given by the federal courts to the various federal statutes dealing with the
same or similar matters.” Nat. Design, Inc., 485 A.2d at 666; see also Berlyn Inc v. The Gazette
Newspapers, 73 F. App’x 576, 582 (4th Cir. 2003).
Similarly, “[t]he Virginia Antitrust Act, with the exception of an interstate commerce
component, shares common elements with sections one and two of the Sherman Act.” Oksanen v.
Page Mein ‘1 Hosp., 945 F.2d 696, 710 (4th Cir. 1991).
The Virginia Antitrust Act prohibits
“[e]very contract, combination or conspiracy in restraint of trade or commerce.” Va. Code Ann.
59.1—9.5 (1998),
and “[e]very conspiracy combination, or attempt to monopolize,
10
§
or
monopolization of, trade or commerce.” Id. at
§ 59.1—9.6. In fact, the Virginia Act specifically
provides that it is to be “interpreted and applied in hai-mony with federal antitrust law.” Oksanen,
945 F.2d at 710. Therefore, Plaintiffs’ claims under the Virginia Antitrust Act are “governed by
the same standard as their claims under the Sherman Antitrust Act.” Va. Vermiculite, Ltd. v. WI?.
Grace & Co.-Conn., 108 F. Supp. 2d 549, 605 (W.D. Va. 2000) (citing Satellite Television &
Associated Res., Inc. v. cont’l cablevision of Va., Inc., 714 F.2d 351, 358 n.13 (4th Cir. 1983)).
Consistent with the above guidance provided by the Fourth Circuit, this Court’s analysis for
Plaintiffs’ claims under the Sherman Act must be applied to Plaintiffs’ antitrust claims under both
Maryland and Virginia law. Because Plaintiffs claims pursuant to the Sherman Act are sufficient
to survive Delta Defendants’ Motion to Dismiss, Plaintiffs’ claims under Maryland and Virginia
state antitrust claims must also survive.
c. Common Law Fraud
Maryland’s Court of Appeals has summarized the elements of a cause of action for fraud
or deceit, “[un order to recover damages in an action for fraud or deceit, a plaintiff must prove (1)
that the defendant made a false representation to the plaintiff, (2) that its falsity was either known
to the defendant or that the representation was made with reckless indifference as to its truth. (3)
that the misrepresentation was made for the purpose of defrauding the plaintiffi (4) that the plaintiff
relied on the misrepresentation and had the right to rely on it, and (5) that the plaintiff suffered
compensable injury resulting from the misrepresentation.” Nails v. S & R, Inc., 639 A.2d 660, 668
(Md. 1994) (internal citations omitted).
Similarly, to establish a claim of actual fraud under
Virginia law, a plaintiff must prove that: (1) the defendant “falsely represented or deliberately did
not disclose (when it had a duty to disclose); (2) a material fact; (3) intentionally and knowingly;
(4) with intent to mislead; (5) on which the [Plaintiffi reasonably relied; and (6) which caused
11
damage to party misled.” A inland v. Deloitte & To ache LLP, 199 F. Supp. 2d 461, 486 (E.D. Va.
2002) (citing Evaluation Research Coip. v. Alequin, 247 Va. 143 (Va. 1994)).
Plaintiffs allege in their Amended Complaints that Delta Defendants “used deception,”
“made a misrepresentation,” and “concealed, suppressed or omitted material facts in connection
with the sale” of Alum. (Compi.
3 17). Specifically, Defendants allegedly “represented” that
Alum prices were offered based on a “competitive market” while participating in an unlawful
conspiracy to “inflict monetary harm” on Plaintiffs. (Id.
318, 322). For example, on December
23, 2008, “[Defendant] John Besson, then-President of [Defendant] Delta Chemical represented
that [it] would need to raise the price of Alum by $36.33 per ton” due to the “sulfuric acid market.”
(Id.
¶ 249, 272).
Similarly, on December 29, 2008, [Defendant] John Besson ernailed the Engineer
Supervisor of Plaintiff Baltimore City and “represented that [Defendant] Delta Chemical would
need to raise the price of Alum due to ‘a substantial increase in one of the raw materials that are
used to make the aluminum sulfate.” (Id.
273). However, Plaintiffs contends that these changes
were misrepresentations which stood in contrast to a decline in the price of sulfuric acid “by more
than a third” from its October 2008 index price by December 2008. (Id.
¶1
249) (emphasis in
original).
Plaintiffs’ allegations, when taken as true, support the claims that Delta Defendants
knowingly misrepresented the price of Alum to Plaintiffs with the purpose of defrauding Plaintiffs
and Plaintiffs reasonably relied upon Delta Defendants’ representation and stLffered a resulting
compensable injury. Nails, 639 A.2d at 66$ (internal citations omitted). Similarly, Plaintiffs’
allegations support Plaintiffs’ claims that Delta Defendants falsely and knowingly represented a
material fact regarding price increases of Alum with intent to mislead Plaintiffs from the ongoing
conspiracy and Plaintiffs reasonably relied on the representation which caused damages to
12
Plaintiffs. Therefore, at this juncture. Plaintiffs’ claims of common law fraud must survive Delta
Defendants’ Motion to Dismiss.
d. Breach of Contract against Defendant Delta ChemicaL
Under Maryland law, the elements of a claim for breach of contract are “contractual
obligation, breach, and damages.” Tucker v. SpecializeciLoan Servicing, LLC, 83 F. Supp. 3d 635,
655 (D. Md. 2015) (quoting Kumar v. Dhanda, 17 A.3d 744, 749 (Md. Ct. Spec. App. 2011)). “In
order to survive a motion to dismiss, a complaint for breach of contract {in Maryland] must allege
facts showing a contractual obligation owed by the defendant to the plaintiff and a breach of that
obligation by the defendant.” Swedish Civil Aviation Admin. v. Project Mgmt. Enters., Inc., 190
F. Supp. 2d 785, 791 (D. Md. 2002) (citing Cont’! Masonn’ Co., Inc. v. Verde! Constr. Co.,
Inc., 369 A.2d 566 (1977)). Likewise, “[for a breach of contract to be actionable [in Virginia], a
party must establish a material breach.” Vienna Metro LLC v. Pidte Home Corp., 786 F. Supp. 2d
1076, 1081 (E.D. Va. 2011) (citing Horton v. Horton, 487 S.E.2d 200, (Va. 1997)).
The central dispute in this case with respect to the first breach of contract claim is whether
Delta Chemical breached its contractual obligation to “only submit price increases that were based
on changes in the contractor’s cost of services and materials.” (Compl.
¶ 328).
Plaintiffs allege
that Delta Defendants falsely represented increases in market prices of raw materials used to make
aluminum sulfate as ajustification for increasing contract prices for Alum. (Id.
¶ 272 -273).
These
price increases allegedly stood in stark contrast to a “crash” in the market for sulfuric acid, a ratv
material used to create Alum. (Id.
¶ 275).
Moreover, prices for other raw materials used to make
Alum had allegedly declined at the time of the price increase. (Id.
¶
276). Plaintiffs assert that
Delta Defendants made affirmative representations to prevent Plaintiffs from “discovering the
actual reason for the artificially-inflated prices.”
I—,
Ii
(Id.
¶
277).
Thus, at this juncture in the
proceedings, the Court finds that Plaintiffs have alleged sufficient facts to sustain their first set
breach of contract claims under both Maryland and Virginia law.
With respect to the second breach of contract claim, the major point of contention is
whether Defendant Delta Chemical “breached their contractual agreements that they had not
agreed, connived, or colluded to produce a deceptive show of competition and had not colluded
with any other person, firm or corporation in the bid on the Alum contracts.”
(Id.
¶
333).
“Beginning at least as early as 2010, Plaintiff WS SC’ s Alum supply contracts incorporated terms
specifying that the Bidder/Offeror[, i.e., Delta Defendants,] had not agreed, connived or colluded
to produce a deceptive show of competition, and had not colluded with any other person, firm or
corporation in the bid on the Alum contracts.” (Id. 1 332). Plaintiffs assert that “[a]fter USALCO
and [Defendant] Delta Chemical combined in November 2011, USALCO was always the
‘winning’ bidder, having either combined or colluded with all viable competitors.” (Id.
¶ 244).
Additional examples provided by Plaintiffs of the alleged collusion include substantial similarity
between Defendant Delta Chemical and USALCO’s bid prices for Alum afier their combination
and alleged “throw away” bids by Cherntrade. (Id.
¶1 252,
254). Plaintiffs also cite a lack of bids
from “freight-logical” chemical plants such as GEO and Southern lonics. (ECF No. 652 at ¶ 16$).
Hence, Plaintiffs have sufficiently alleged that there was a non-collusion component to their
contract with Delta Defendants which was breached. such that their second set of breach of contract
claims, under both Maryland and Virginia law, may proceed.
e. Restitution, Disgorgement, and Unjust Enrichment
In Maryland, to support a claim for unjust enrichment, “a Plaintiff must establish: (1) a
benefit [was] conferred upon the defendant by the plaintiff (2) an appreciation or knowledge by
the defendant of the benefit; and (3) the acceptance or retention by the defendant of the benefit
14
under such circumstances as to make it inequitable for the defendant to retain the benefit without
the payilient of its value.’ S’i’edish CivilAviation Athnin., 190 F. Supp. 2d at 792—93. En Virginia.
“[The] elements of a breach of contract action are (1) a legally enforceable obligation of a
defendant to a plaintiff; (2) the defendant’s violation or breach of that obligation; and (3) injury or
damage to the plaintiff caused by the breach of obligation.”
Ncnar,
Inc.
v. fed. Bits. Council. 784
S.E.2d 296, 299 (Va. 2016) (quoting U/too v. QSP, Inc., 624 S.E.2d 43, 4$ (Va. 2006)).
Plaintiffs assert that it would be “inequitable” for Delta Defendants “to be allowed to retain
the benefits” they “obtained from their illegal agreements, manipulative acts, and other unlawful
conduct” at the expense of Plaintiffs. (Compl.
337). Moreover, Plaintiffs aver that it would be
equally inequitable for Defendants John Besson and Rebecca Besson to be “allowed to retain the
millions of dollars that each personally received
...
in connection with [Defendant] Delta
Chemical’s combination with USALCO” because of its alleged connection to the aforementioned
conspiracy. (Id.
338). As discussed above, Plaintiffs have sufficiently alleged facts pertaining
to the contracts which they had made with Delta Defendants regarding agreed terms on noncollusion. (Id.
332). Moreover, Plaintiffs have set forth sufficient allegations and examples of
Delta Defendants’ breach of these non-collusion contracts to show a violation. (Id. ¶ 333). Finally,
Plaintiffs have shown that Delta Defendants’ alleged breach of these contracts, if true, would cause
Plaintiffs significant economic injury. (Id.
¶ 34 Id).
Therefore, the Court concludes that Plaintiffs’
claims for unjust enrichment must survive Delta Defendants’ Motion to Dismiss.
B. Motion to Strike Certain Allegations
Delta Defendants ask the Court to strike the allegations contained in paragraph 131 of
Plaintiff WSSC’s Amended Complaint regarding its purchase of PAC, on the basis that such
allegations are “irrelevant to an Alum price fixing conspiracy” and “unsupported by the requisite
15
factual allegations.” (ECF No. 90 1-1, at 27). Delta Defendants maintain that because “PAC is not
the subject of this litigation, and
no
prior price fixing scheme has been pled regarding PAC.” (Id.
at 27). In sum, Delta Defendants argue that there is no basis of allegations of conspiracy regarding
PAC and, “in any event,” these allegations are “not probative to the issues in this case relating to
liquid Alum.” (ECf No. 904, at 11).
On the other hand, Plaintiffs allege in their Amended Complaints that bids received for
PAC raise “similar concerns” to the conspiracy regarding liquid Alum. (Compi.
¶ 131). Plaintiffs
provide examples of Delta Chemical “winning” PAC contracts in 2004 and 2009 at prices which
increased by seventy-two percent over five years and explain that the next-lowest bid submitted
on the 2009 contract
was
“more thaii three times” Defendant Delta Chemical’s winning bid. (Id.
¶ 13 1) (emphasis in original). Plaintiffs further argue that their allegations regarding PAC are
“relevant to the [Defendants’] ability to conspire. and the history of conspiracy, in the water
treatment chemical
industry.”
(ECF No. 902, at 2$). Plaintiffs note that USALCO “explicitly
linked non-competition agreements with [Defendant] Delta on Alum and PAC.” (Id. at 28).
“[M]otions to strike are usually ‘viewed with disfavor’ and will generally be denied unless
the allegations have no possible relation to the controversy and may cause prejudice to one of the
parties, or if the allegations confuse the issues.”
Gray. 2010 WL 1375329, at *2.
In fact,
“Rule 1 2(f) should be construed strictly against striking portions of the pleading on grounds of
immateriality and if the motion is granted at all, the complaint should be pruned with
care.” Morgan Home fashions, Inc., 2004 WL 1950370, at *$
When accepting Plaintiffs’
allegations as true, a possible relation can be drawn between USALCO’s use of non-competition
agreements with Defendant Delta Chemical on PAC in negotiations leading up to their
16
________
combination and Delta Chemical’s participation in the general liquid Alum conspiracy. (ECf No.
902 at 2$).
Moreover, even if the allegations “may ultimately prove to be immaterial,” they are not “so
wholly impertinent or scandalous as to presently warrant the ‘drastic remedy’ authorized by Rule
12(f). Once discovery is complete and the record more frilly developed, [Delta] Defendants will
have the opportunity to renew any challenges they may have to the Plaintiffs’] allegations and/or
evidence by way of an appropriate Rule 12(b)(6) motion, motion for summary judgment, or motion
in limine.” Adams v. County ofErie, Pa., 2009 WL 4016636, at *1 (W.D. Pa. 2009). Thus, at this
stage in the litigation, the Court must deny Delta Defendants’ Motion to Strike Certain Allegations.
IV.
CONCLUSION
for the aforementioned reasons, Delta Defendants’ Motion to Dismiss and Strike Certain
allegations is denied. An appropriate Order accompanies this Opinion.
Date: August /0 I $
JQE L. LINARES
,g’hief Judge, United States District Court
17
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?